July's Auto Retail Performance: Auto retail sales in July maintained a steady 10% YoY growth, mirroring the previous month. Notably, all vehicle categories recorded positive figures: Two-Wheelers (2W) at 8%, Three-Wheelers (3W) at 74%, Passenger Vehicles (PV) at 4%, Tractors (Trac) at 21%, and Commercial Vehicles (CV) at 2%.
Monthly Analysis Reveals Mixed Results: Despite the consistent YoY growth, the month-on-month trend observed a 5% decline in retail sales. The exception was the 3W segment, which grew by 9%, while categories like 2W, PV and Trac, registered reductions of 6%, 4%, 8%. CV closed flat at -0.2%.
Performance Versus Pre-COVID Levels: When compared with pre-COVID figures, overall retails showed a 13% decline. The 2W segment grappled with a significant 23% dip, while CVs also underperformed with a 4% contraction.
Three-Wheeler Segment Shines: July was particularly commendable for the 3W category, which registered an all-time high sale of 94,148 units, translating to a 74% YoY and 9% MoM growth.
Inventory Insights: The inventory for Passenger Vehicles has surpassed the 50-day mark and currently hovers between 50-55 days, suggesting an inventory build-up in anticipation of the forthcoming festive season.
Agricultural Forecast: The Indian Meteorological Department (IMD) predicts below-average rainfall in August. This raises potential apprehensions regarding reduced yields of kharif crops, which could potentially dampen the immediate resurgence of rural demand.
FADA's Stance: While caution remains the operative word in the short term, FADA is hopeful about retail growth prospects, especially with the festive season on the horizon.
The Federation of Automobile Dealers Associations (FADA) released Vehicle Retail Data for July’23.
Reflecting on July 2023, FADA President, Mr. Manish Raj Singhania said, "Auto retail grew 10% YoY in July, mirroring last month's trend. However, the MoM decline continued highlighting short-term slowdowns.
On a YoY basis, segments like 2W, 3W, PV, Tractor, and CV grew at rates of 8%, 74%, 4%, 21%, and 2%. On MoM basis, except 3W's 9% growth, other segments declined. Compared to pre-COVID figures, auto retail decreased by -13%, with significant drops in 2W and CV at -23% and -4%.
3W hit record sales in July'23 at 94,148 units, a 74% YoY and 9% MoM increase, surpassing previous high of March’23’s 86,857 units.
Despite challenges like heavy monsoons and a tilt towards EVs due to high fuel prices, 2W showed resilience in July '23, with increased demand and trust in reputable brands. The 3W segment's record numbers indicate industry potential and a growing EV interest. Yet, addressing issues like OEM support and dealer engagement remains crucial.
PV sales in July '23 were a mix of challenges and triumphs. The month saw a surge in orders and timely OEM supplies, especially with the introduction of new products. However, severe monsoons and flood like situations especially in North India, impacted sales. SUVs continued to remain a popular choice.
The CV segment showed mixed dynamics. Despite robust stock availability and growth in areas like school buses, challenges from erratic weather and high vehicle costs affected demand. However, infrastructure project boosts remain a silver lining."
Near Term Outlook
The automotive industry is poised for an intriguing August, marked by a blend of opportunities and challenges. Across the board, there are common positive indicators echoing hope. The 2W sector expects an uptick, driven by upcoming festivals, a harmonious supply-demand equilibrium and the rollout of new models. The 3W category, too, is witnessing a surge in interest, particularly towards electric variants. In the realm of CV, the anticipation of the festive season, the aftermath of a good monsoon and pent-up demand set the stage for potential growth. Similarly, the PV segment is likely to benefit from festive euphoria and new product introductions coupled with high demand in SUV category.
However, challenges loom on the horizon. The 2W segment's entry-level category continues to be a cause for concern. In the CV space, there are apprehensions regarding streamlined loan disbursements for buyers. Inventory level in PV has breached 50 days mark in anticipation of upcoming festival season and the slowdown in entry level car remains. A larger concern is the IMD's projection of a below-average rainfall in August, potentially leading to lower crop yields. This could impact the purchasing power, especially in rural regions. While the industry has experienced a tepid trend over the past two months, FADA remains watchful in the short term. Nonetheless, there's optimism about a rise in retails as we approach the festive season.
Key Findings from our Online Members Survey
Inventory at the end of July’23
Average inventory for Passenger Vehicles ranges from 50-55 days
Average inventory for Two – Wheelers ranges from 20-22 days
Expectation from August